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The REIT Footprint Expands Globally

Justin Brown, Senior Vice President of Green Street’s Advisory & Consulting Group, discusses the growth of REIT markets around the world, including the potential emergence of India’s first REIT. The growth of the REIT structure globally presents both opportunities and challenges to investors and emerging REITs.

Key Regions to Watch: United States, Europe, and Asia

REIT markets around the globe have seen immense growth recently. The cumulative market capitalization of REITs globally is approaching $2 trillion, and 35 countries now have active REIT legislation, including 25 nations with at least one actively traded REIT. With the growing momentum for REITs, the United States, the U.K. and Continental Europe, and Asia are particularly key regions to watch.

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In the United States, one trend to monitor is the disconnect in pricing between the public and private real estate markets. As of Nov. 1, the major sector REITs traded at a 13% discount relative to the private market value of their underlying assets, and that discount has averaged over 10% for three years. This valuation disconnect in traditional sectors has suppressed capital markets activity, resulting in fewer IPOs and secondary equity offerings. In contrast, there has been activity in non-traditional sectors, including net lease, data centers, and temperature-controlled warehouses. For example, Green Street’s Advisory Group served as an independent advisor on an IPO earlier this year for Americold, a company focused on cold storage and refrigerated warehousing solutions. Non-traditional REITs continue to attract capital, continue to perform well relative to traditional sectors, and are becoming a bigger piece of the pie in the U.S. REIT market. See Green Street’s report on recent Commercial Property Price Index enhancements for more information about the tremendous growth in non-traditional sectors over the past decade.

U.S. Equity Market Cap ($ million)

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Source: Nareit, data as of October 2018

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